In an effort to bring inventory levels under control, India's second largest car manufacturer Hyundai Motor India today said that it will cut output by 20-25 per cent starting December 29 as demand has slackened, confirm senior company officials.
However, the company will go ahead with the launch of its latest model, i20, also on the same date.
Accordingly, the company's plant based in Sriperumbudur near Chennai will witness a cut in production shifts from three shifts currently to two shifts, effective from Monday.
Heung Soo Lheem, managing director and CEO, Hyundai Motor India (HMIL), said: "We are cutting production at Chennai plant as demand has declined. We do not see any major change in demand untill the second half of 2009. Banks have cut rates only marginally but more action is required for demand to pick up."
The company has also asked its auto component manufacturers to prepare for an adjustment in supplies, which will be in line with HMIL's demand.
Although HMIL, which was so far thought to be secluded from demand slowdown in the domestic market as its models, including i10 and Santro continued to gather strong response, the company recorded a fall of 23 per cent last month in sales, as tighter liquidity and high interest rates impacted purchases.
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The company has also downsized its sales target for the financial year by 7.5 per cent to 4,90,000 units, including exports as compared to 5,30,000 units projected earlier. Company officials refused to give details of sales target for 2009.
"We may not be able to post a significant increase in sales in the first half of next year as demand is expected to remain sluggish but the second should see an upsurge," said Ashok Jha, president, HMIL.
Furthermore, the company also stated that it is going ahead with the launch the i20 model on December 29, despite the general contraction in demand currently prevalent in the market.
The car, which will be available in diesel and petrol option will be a premium hatchback model and will be pricier than the Getz. HMIL also admitted that the model was initially not scheduled for the Indian market due to its price when compared to its size.
"We will sell 10 per cent of the 1,50,000 units of the i20 model, produced annually, in the domestic market while the rest will be exported. In fact, the model went under production on October 15 in Chennai and we have already started with exports to European countries," Lheem added.
The company further stated that it will compensate its dealers aggregating to the tune of Rs 35 crore, which rose because of the Cenvat rate cut announced by the government last month. The company had passed on the benefit of the excise duty cut to customers.
The company announced today that it will increase prices by a minimum of 2 per cent across all its models in January.
Lheem said, "We tried to absorb whatever increase was there in various categories but we cannot take it anymore. We are not in a position to avoid the rise and hence we will pass it on to the consumer."
The company sells seven models currently in India in the price band of Rs 2.67 lakh Rs 16.97 lakh ex-showroom Mumbai.
Other companies who have also declared price hikes in January include Japanese car makers Toyota and Honda. Both companies have stated that high cost of import, thanks to the weakening Rupee, has forced the upward revision in prices.